It is a well-known characteristic of most markets that short-term price fluctuations may be expected. Such fluctuations are typically present even where the long-term trend may result in price movement in substantially one direction. Such price fluctuations may result in part because the market players may disagree on the speed and degree with which the market is moving in the expected direction. As a result, the cumulative total of the day-to-day price increases of a stock, commodity or similar financial instrument, may be large over any give period, relative to the price of the item. However, when offset by the cumulative total of the day-to-day price decreases, the overall shift in price may be relatively modest.
Given such short-term price volatility, it is natural that one may desire to repeatedly enter the market positioned to profit from short-term price movement, and then to timely reposition to benefit from short-term price movement in the opposite direction. Given this natural desire, it may be expected that a number of automated resource allocation and management systems have been developed which attempt to exploit short term price movements in either or both directions. Such automated systems attempt to move in and out of the market in a short-term manner whereby short-term movement in the price may result in gain. Such movements into market and out of the market are generally made with little overall consideration to the long-term direction of the market, and are intended to benefit specifically from short-term price volatility.
A number of automated resource allocation and management systems are known. U.S. Pat. No. 5,563,783 discloses a computer-implemented method and system for securities pool allocation. In this reference, a rule-based greedy algorithm optimizes the allocation of mortgage-backed securities from pools to contracts. U.S. Pat. Nos. 4,346,442, 4,597,046, 4,774,663 and 4,376,978 disclose securities brokerage-cash management systems. U.S. Pat. No. 4,674,044 discloses an automated securities trading system.
What is needed is an automated resource allocation and management system which is adapted for use in a market wherein short-term market volatility provides an opportunity for a correctly-positioned investor to benefit from market movement in both directions over short periods of time. The automated resource allocation and management system must provide for the coordination of the relative levels of investment of several liquid investments, and provide triggers to indicate the need to move capital between the investments to maximize the return from short-term price movement of the various investments.